Mothercare shares rise as it raises profit expectations

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The Independent Online

Shares in Mothercare leapt 54p to 278p yesterday after a trading statement indicated that interim figures for the period ending next Saturday will show like-for-like sales up 6.6 per cent and margins improving 5.8 percentage points.

The maternity and baby-goods retailer's shares have tripled in six months on the back of a dramatic recovery under new management. Ben Gordon, the chief executive, who joined last December, said: "I am pleased with the trading performance over the first six months of the three-year turnaround programme. It shows the patient is responding to treatment."

This means that first-half profits will be well ahead of market expectations. Analysts generally were expecting pre-tax profits for the full year to March to be no higher than £1m but were yesterday upgrading their figures. Iain McDonald of Numis, who had been the most optimistic at £1.5 million, promptly raised his forecast to £10.9m. For the next financial year he has upgraded from £8m to £15m.

A key factor behind the recovery is the significant improvement at the disastrous distribution centre at Daventry. Mr Gordon said: "It is still not working as well as it should and it is still too expensive, but at least it is now getting the right products to the right stores."

He said the quality and design of products have been improved. Because production is outsourced to the Far East and priced in US dollars, Mothercare's margins have been boosted by the fall in the dollar.

In sharp contrast to Marks & Spencer, which was affected by the late hot spell in September, Mothercare's autumn and winter ranges were rolled out successfully, according to Mr Gordon.

Mothercare will release its interim results on 20 November. They will show total sales up 4 per cent, less than the like-for-like figure because the company is halfway through closing 15 underperforming stores. It will have 235 by the end of the financial year.

Mr Gordon is keen to emphasise these are still early days and points out that the current improvement is in comparison with particularly weak and volatile trading this time last year. He cautions: "Much remains to be done to achieve a sustained recovery but we remain firmly on track with our plans."